5 Ways to Fund Your Small Business (Without VCs)

You don't have to turn to venture capitalists to fund your startup. You can find money other places; you just need to know where to look.

For many aspiring entrepreneurs, funding a startup or new business is one of the biggest obstacles you will ever face. The good news is that there are now more tools and resources than ever before for funding a business. Just a few decades ago, you would have had to mail letters, make cold calls or visit potential investors in person. Now you can do most of this online. While you still must be ready to accept a certain amount of rejection, at least you can get an answer within days or even hours rather than weeks.

A word of warning: Don’t make the common mistake of asking for funding before you’re ready for it. If you want potential investors or other sources of money to take you seriously, you must be able to present them with a thorough blueprint of your idea. That’s why you still need a solid business plan. It’s a good idea to show your business plan to at least one successful entrepreneur whom you trust. This person may be able to point out flaws or areas where your plan needs filling out.

Let's look at some of the best possibilities for funding your startup or existing small business.

1. Loans

Some people are able to borrow money from friends or family members. This depends, of course, on what kind of resources your contacts have and how open they are to the idea of investing in your business. It may be worth asking.

The Small Business Administration makes a variety of loans available to small businesses. This is a good place to start, as you can often get better terms from the SBA than from a private lender. You might also look into local credit unions in your area. Your own bank is another possibility. Before applying for a loan, however, you should carefully consider the terms. Remember that loans must be paid back, regardless of how your business venture turns out.

2. Grants

Grants are preferable to loans, as they don’t have to be repaid. There are many specialized grants, so you have to do thorough research in this area. Grants can be based on who you are or the nature of your business. There are, for example, grants that are given to women, young entrepreneurs or people of certain racial or ethnic descent. There are also grants created to encourage certain types of businesses. In addition to providing information about loans, you can search for grants using the SBA’s Loans and Grants Search Tool (though the SBA itself does not provide grants).

3. Business Partnerships

If you have an idea for a business, or have already started a business, the right partner could help provide funding. You can start by going through your existing list of contacts. Of course, you will have to be able to convince this person or people that your business is worth investing in.

If you want to recruit strangers into your business, you will have to do some serious networking. This includes going to business events in your area, and being active online. LinkedIn can be a good place to start for networking online, but you will have to target contacts whom have some connection with your industry. Business forums are another possibility. Remember that effective networking means connecting with people and building a relationship—not simply asking for money up front.

4. Corporate Sponsors

Corporate sponsorship isn’t right for everyone, but for some it’s a good way to help get your small business off the ground. Many large companies are willing to help fund small businesses if they are confident they can get something in return.

This can work in a variety of ways. A company might sponsor a product, event, online or offline publication, or even an entire business. This business could be a startup or an existing business. The key is to be able to offer your sponsor something valuable, such as access to a certain demographic or positive public relations. An example of the latter is when a company sponsors a small business that makes an environmentally friendly product to enhance its green image.

5. Crowdfunding

Sites like Kickstarter and Indiegogo have become very popular recently. They provide platforms that anyone can use to raise money. This is quite a competitive process, though, and you will have to do everything you can to call attention to your project. A good video presentation is a must, as is a coherent business plan that can be explained concisely. Crowdfunding must be used in conjunction with other social media to call attention to your project.

Shawn Porat is the CEO of Fortune Cookie Advertising, a non-traditional and out-of-home media placement company selling advertising space within fortune cookies at Chinese restaurants throughout the United States. He is also a member of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world's most promising young entrepreneurs.